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Deprection in case of some block of assets transfered

20 September 2019

hello, i'm virendra rathod

i have quary regarding calculation on depreaction in case sales of asset

for example, on 1/4/18 total block of asset is rs 1,00,000, out of it some assets worth rs 30,000 sold on 1/1/2019. Thus, wdv as on 31/3/2019 is rs 70,000.

so on which amount depreciation should be counted ??????

on 1,00,000 or 70,000 or on 70,000 plus proportionate dep'n on 30,000 on day basis

Thanks & Regards

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5 Replies

Pallerla Vamshi (25 Points)
Replied 20 September 2019

Hi

As per income tax act 1961 under block of assets model as per sec 32 if any asset tfred then it should be reduced from block of assets and deprecation need to be calculated on remaining amount after sale only if any other assets exists in block.

If no asset exists in block then capital gains would arise in that case no depreciation will be calculated.

So you need to calculate deprecation only on 70000 rs only

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debora M (BUSINESS DEVELOPMENT MANAGER) (1697 Points)
Replied 20 September 2019

depreciation on 70,000

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Suresh Thiyagarajan (Student) (3986 Points)
Replied 20 September 2019

1. Yes, depreciation will be on Rs. 70,000. The order of WDV table will be as follows,
WDV at the beginning of the year
(+) Additions made during the year falling within the same block
(-) Amount received towards sale of asset falling within the sale block
(=) WDV at the end of the year ( in your case it is Rs. 70,000)
So, depreciation must be charged on this Rs. 70,000.
Please correct me if the above solution has an alternative view.

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rama krishnan (12234 Points)
Replied 21 September 2019

Special provision for computation of capital gains in case of depreciable assets.

50. Notwithstanding anything contained in clause [42A] of section 2, where the capital asset is an asset forming part of a block of assets in respect of which depreciation has been allowed under this Act or under the Indian Income-tax Act, 1922 [11 of 1922], the provisions of sections 48 and 49 shall be subject to the following modifications :—

[1] where the full value of the consideration received or accruing as a result of the transfer of the asset together with the full value of such consideration received or accruing as a result of the transfer of any other capital asset falling within the block of the assets during the previous year, exceeds the aggregate of the following amounts, namely :—

[i] expenditure incurred wholly and exclusively in connection with such transfer or transfers;

[ii] the written down value of the block of assets at the beginning of the previous year; and

[iii] the actual cost of any asset falling within the block of assets acquired during the previous year,

such excess shall be deemed to be the capital gains arising from the transfer of short-term capital assets;

[2] where any block of assets ceases to exist as such, for the reason that all the assets in that block are transferred during the previous year, the cost of acquisition of the block of assets shall be the written down value of the block of assets at the beginning of the previous year, as increased by the actual cost of any asset falling within that block of assets, acquired by the assesseeduring the previous year and the incomereceived or accruing as a result of such transfer or transfers shall be deemed to be the capital gains arising from the transfer of short-term capital assets.

so in your case, the value for which asset sold required to compute short term capital gain or value on which depreciation should be computed. for example if you have sold that asset for a consideration of rs. 1.5 lakhs and you have incurred 20000 towards that sale then
full value of consideration - 150000
less
wdv in the beginning of the year - 100000
expenses incurred for sale - 20000
short term capital gain - 30000

in the above example consider the sale value as 30000 and expenses towards transfer as 5000 then
sale value 30000
less
wdv 100000
expenses 5000
then value on which depreciation computed will be 105000 - 30000 = 75000
wdv of the block of assets will be taken as 75000 when block of assets exists
and when block of assets ceases to exist 75000 will be taken as short term capital loss
correct me if I'm wrong

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